What should Deepwater pay?
Wednesday, July 3, 2013 | www.independentri.com
Assuming that the Deepwater Wind project goes ahead – and I hope it doesn’t – the question is: how much does it pay the town of Narragansett for its consent? Deepwater Wind has offered $2.25 million. That means it will pay as little as it can get away with. What should the town get? As much as it can. Let’s face it, the town has power right now because of something that Deepwater Wind needs – access to land and National Grid’s substation. Without it, Deepwater will have to arrange for a much more difficult and more expensive spot north of Narragansett. So, negotiate hard, and get a lot.
The first part to any settlement should be payment over the 20-year life of the project for the inevitable town costs of oversight, engineering and infrastructure that will be incurred. These costs should certainly not fall on the shoulders of the taxpayer. They should be relatively easy to estimate.
The bulk of the settlement should be an up-front payment of many millions – more than the current offer, I think – as compensation for allowing the use of town land. How do you figure the amount? Not so easy.
Should the project fall through, Deepwater Wind will have to again incur all of the costs that it has sunk into the Narragansett portion of its project, maybe more. This is big bucks – executive and legal time, survey costs, cost of dealing with various agencies and the town, engineering studies and estimates, obtaining the myriad approvals needed, costs for the Narragansett marketing campaign and, I suspect, many others. Then there is the time lost in getting the program up and running. Deepwater has already pushed its construction start date from 2013 to 2014 or 2015. Its investors can’t be pleased, and the delay is costly. It may lose on its stated objective of being the first operator of a deepwater wind farm in New England. They need to continue this pilot project and get it up as quickly as possible to be a credible bidder on large-scale wind farms in the area and likely elsewhere. So the company has a strong incentive to settle.
How to estimate the amount the town should hold out for? The first thing is to get some idea of what Deepwater Wind has incurred in the Narragansett program so far. It seems to me that a handful of town engineers and staff, plus someone experienced in similar utility/technical projects, could come up with a good guess. Maybe other towns in the United States or Europe have had similar experiences.
The second way of looking at the sum is to figure out what the town would like to do with the money. Certainly whatever results should be a long-lasting addition to the town and for the direct benefit of the citizenry and visitors. None of it should go for recurrent expenses or expenses on items that are traditionally funded from the town budget and taxpayers – for example, roads and schools. There will be lots of ideas – a park, beautification of the Pier shopping area and parking lots, which an organization called Where’s The Town has already produced architectural drawings for, improvements to Sprague Park or maybe a visitor center touting the town and area and local restaurants and shopping. The Town Council can produce a better list than I, but they should think smart and big. There is only one shot at this before the beach, roads and park get torn up, and the program is out of the town’s hands.
The third is to pick a number the town thinks is right for them. Why not hold out for the approximately $7.5 million dollars paid for landing rights for the Cape Wind project?
No matter what number is picked, negotiate hard. If the Town Council figures it does not have a tough negotiator in its midst, find one.
The town is up against some moneyed, smooth-talking seasoned and ambitious businessmen. They’re good. Make no bones about it. Jeff Grybowski, chief executive officer, is a highly experienced lawyer and businessman and described in the company’s website as experienced in the “private and public sector on complex policy, financial and development matters.” He worked for one of the country’s elite law firms, Sullivan and Cromwell, in New York.
The rest of the management of Deepwater Wind: President, Chief Financial Officer, General Council, Vice President of Permitting and Environmental Affairs, vice presidents of Market Development, Development and its Board of Managers (Board of Directors) are impressive in their own functions.
The company’s financial resources, and ability to pay for access to Narragansett are there. Deepwater Wind will spend $1.5 to 2 billion dollars to build its first wave of turbines off of Block Island and in Rhode Island and Massachusetts waters. Its owner, D. E. Shaw Inc., a diverse investment firm, has more than $30 billion worth of investments. What’s paid to Narragansett is minuscule by comparison.
So, Town Council, this is a worthy challenge. The legacy of your tenure may be made or broken by your handling of the Deepwater Wind affair. The ball is in your hands. Put it through the hoop. Make a decision to go or not go. If the answer is go, don’t do it without the town’s pound of flesh.
C. Davis Fogg
Narragansett
URL to article: https://www.wind-watch.org/news/2013/07/03/what-should-deepwater-pay/